The Tale of Two Covenants

            Whether a small company or an new employee in the process of being hired "covenants not to compete" are common employment agreements that need to meet specific criteria to be upheld in court. Some recent cases in Massachusetts evaluated covenants and there is a simple formula to make sure that the restrictions are not overly restrictive.

            In one the court found that due to the nature of the sales work, the reasonableness of the scope of the restriction and the geographic area,  the covenant was enforceable and the salespersons post employment activity was restricted. The court scolded that the law cannot allow employees to shop around and jump ship for the next best deal especially when they carry with them confidential information and or customer lists.

            In another the court found a non compete unreasonable and therefore unenforceable due to its breadth and the lack of any geographic scope defined in the agreement for a financial analyst moving to a new place of employment. Specifically the court stated:

            "The clause provided that the employee 'shall not perform any services, either as a consultant, employee, owner, investor, or otherwise, with or for any foreseeable business, product or service of the Company.' The scope of prohibited activities is extremely broad and vague, particularly given the comprehensive nature of services and products offered by firms such as Athena. Further it is unlimited in geographic scope. The function of the non-compete covenant as drafted appears intended to restrain ordinary competition. Thus, the clause is likely to be determined to be unenforceable."  See Suffolk Superior Court, Edwards v. Athena Capital Advisors, Inc. (Civil Action No. 07-2418-E) (Aug. 7, 2007).